Woolworths Limited (WOW)

By Jason Fittler,

WOW, annual profit fell 13% amid escalating competition in Australia's supermarket sector, including from foreign rivals. 

They reported a net profit of 2.15 billion Australian dollars in the year to June 28, compared with A$2.45 billion a year earlier. Revenue was flat at A$61.15 billion.

Its bottom line was weighed down by one-off charges from restructuring, including redundancy costs. They retained a final dividend of A$0.72 a share same as last year.

Australia's supermarket sector was for years dominated by Woolworths Ltd. and Coles Supermarkets. However, new entrants, including Costco Wholesale Corp. and Germany's Aldi, are, shaking up the nation's A$94 billion industry, mainly by undercutting prices.  

The trend has been seen elsewhere, including in the U.K., where supermarkets are under growing pressure. Woolworths is cutting costs faster than projected to adjust to the new environment.

Woolworths has separately announced Chairman Ralph Waters would stand down on Sept. 1, and be succeeded by Gordon Cairns, chairman of Origin Energy Ltd.

In June, Mr. O'Brien said he would leave the company once a successor was found. He accepted responsibility for the disappointing performance of one of the nation's biggest companies, which also runs several discount and home-improvement stores.

The share price has held upon the back of these announcements current around $27.34 per share.

The price of Woolworths has moved quite a bit over the past 12-months with highs of $38.49 and lows of $25.29.

At the current price, it is trading 14% above our price target indicating that the price will be lower for longer.

With a gross yield of 7%, the stock is attractive to hold as long as you have a long investment time frame. And you are comfortable that the new Chairman and CEO will get this company back on track.

For more information about Woolworths Limited (WOW) please contact us on 07 4771 4577.